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Difficulty: MediumRecurrent and Capital Expenditure Classification

The Ministry of Water Resources of a state government recorded the following financial disbursements during the fiscal year:

- Construction of water treatment dams: ₦45,000,000
- Monthly staff salaries and allowances: ₦12,500,000
- Purchase of water testing chemical reagents: ₦3,800,000
- Acquisition of heavy excavators: ₦18,000,000
- Routine repairs and servicing of water pumps: ₦2,200,000
- Laying of new main water pipelines: ₦25,000,000

What is the total recurrent expenditure of the ministry for the fiscal year?

Answer: 18500000 ₦

Answer

The total recurrent expenditure of the ministry for the fiscal year is ₦18,500,000.
Recurrent expenditure includes ongoing operational costs such as staff salaries (₦12,500,000), consumable testing chemicals (₦3,800,000), and routine pump servicing (₦2,200,000). Adding these together yields ₦18,500,000. Dam construction, excavator acquisition, and pipeline laying are capital expenditures because they acquire or construct long-term public infrastructure.

Step-by-Step Solution

1
Classify disbursements into recurrent expenditure (operating costs and maintenance) and capital expenditure (asset creation and major long-term additions).
Recurrent items identified: Staff salaries (₦12,500,000), Chemical reagents (₦3,800,000), and Routine repairs of pumps (₦2,200,000). Capital items excluded: Construction of dams (₦45,000,000), Acquisition of excavators (₦18,000,000), and Laying of new main pipelines (₦25,000,000).
Recurrent expenditures are operational, short-term costs incurred in the daily running and maintenance of government services, whereas capital expenditures create non-current fixed assets or extend their working lifespan.
2
Calculate the total recurrent expenditure by summing all operational and maintenance disbursements.
Total Recurrent Expenditure = ₦12,500,000 + ₦3,800,000 + ₦2,200,000 = ₦18,500,000.
Summing the classified operational costs provides the total recurrent expenditure funded from the Consolidated Revenue Fund.

Key Concept

Recurrent expenditure in public sector accounting covers operational costs, wages, consumables, and routine maintenance necessary for daily public operations, funded primarily through the Consolidated Revenue Fund.
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Recurrent and Capital Expenditure Classification

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